Trade winds in RBI sails: A receding El Niño may ease food inflation

The annual southwest monsoon is critical for the agricultural sector, which accounts for a slowly shrinking share of our economy but still supports a large bulk of India’s population.
The annual southwest monsoon is critical for the agricultural sector, which accounts for a slowly shrinking share of our economy but still supports a large bulk of India’s population.

Summary

  • strapline: The likelihood of El Niño easing by monsoon time has risen. With luck, rainfall will relieve inflationary pressures and help our central bank achieve the price stability it’s aiming for.

Meteorologists have predicted that El Niño conditions are set to dissipate by this summer, perhaps even by June, raising hopes of a bountiful Indian monsoon in 2024. After below-average cumulative rainfall and a warm 2023, various national weather forecasting agencies now expect this see-saw of the Pacific Ocean to turn neutral by April-June and then start developing into La Niña, the opposite condition. As geography dictates and experience shows, this switch implies a shift from a relatively parched Indian subcontinent to a wetter one. So, if the latest forecasts turn out to be accurate, it would raise the probability of rainfall that will favour healthy farm harvests, keep food prices in check and aid India’s central bank in keeping control of the rupee’s internal value by ensuring that it does not lose its purchasing power at an annual rate that departs from a preset 4%. In other words, we have good economic news from the other side of the globe.

El Niño is part of what’s called a ‘southern oscillation’ pattern, a three-stage cyclical phenomenon that occurs across the equatorial zone of the vast Pacific and affects precipitation in Asia. The complexity is that the entire cycle’s span varies; it typically takes anything from 2 to 7 years. El Niño usually lasts for a year or less, with a transition phase, while La Niña can persist for 1-3 years. Here’s what happens. Under normal conditions, strong trade winds blow from east to west across the tropical zone of the Pacific Ocean, pushing warm surface water towards Asia. These winds weaken, cyclically. As they do, the ocean’s superficial warm water slops towards South America in the direction of the planet’s spin, leaving the Asian seaboard with an upwell of colder water. Since it takes warm seas for rain clouds to form, this tilting away of Pacific warmth from Asia to America, called El Niño, results in less rainfall over Asia than usual. The neutral phase, projected later this year, would see trade winds regaining their usual strength, which would let the ocean’s ‘thermocline’—which separates the cold water of its depths from the warm surface above it—flatten out. Once La Niña takes hold after that, the upwell scenario would flip sides: i.e., the ocean’s warmth would tilt Asia-wards, lowering air pressure and causing evaporation to deliver more rain than usual in this part of the world, while leaving South America short of precipitation instead. For a fulsome monsoon in India, however, another factor needs to be kept track of: the Indian Ocean Dipole. This measures the difference in sea-surface temperatures on opposite sides of this ocean. If mercury readings differ a lot between its eastern and western parts, it could either mitigate or amplify the impact of the Pacific’s oscillation. And if that’s not enough of a complication, the effects of climate change have also given global weather systems an extra dose of unpredictability.

In India, how those two oceans behave, especially the Pacific, holds more than academic interest. The annual southwest monsoon accounts for about 70% of the country’s overall precipitation. It is particularly critical for the agricultural sector, which accounts for a slowly shrinking share of our economy but still supports a large bulk of India’s population. That El Niño is expected to ease in a few months is a big relief under the economic circumstances we face today, with the central bank keen to anchor inflation. Thankfully, global trade winds may soon help fill its sails on that mission.

Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
more

MINT SPECIALS

Switch to the Mint app for fast and personalized news - Get App